Friday, July 17, 2015

The Lloyd’s Business Blackout Scenario

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# 10,334

 

In terms of both economic and societal impact, very little beats a prolonged and widespread power outage.

 

It is the job of the North American Electric Reliability Corporation (NERC) to "ensure the reliability of the North American bulk power system", a mandate given to it in 2006 as a result of the 2003 Northeast blackout which affected more than 50 million people in the United States and Ontario, Canada. 

 

In  2009, NERC issued a public notice warning that the grid was `vulnerable’ to cyber attack.

 

Nearly two years ago, in GridEx 2013 Preparedness Drill, we looked at a major drill mounted by NERC to determine their ability to respond to a full grid-down situation, due to a cyber-attack.  Despite attempts to `harden’ the electrical grid against attacks, last July Bloomberg News reported:

 

U.S. Power Grid Vulnerable to Attack: Congressional Research Service

A coordinated and simultaneous attack on the nation's electricity grid could have “crippling” effects including widespread extended blackouts and “serious economic and social consequences,” according to a federal report on the physical security of high-voltage transformer substations.

 

A deliberate cyber attack isn’t the only plausible scenario that could take down large portions of the grid.  Also high on that list are geomagnetic storms – caused by naturally occurring solar flares -  that have the potential to disrupt or even destroy large parts of the power grid.

 

In November of 2012 the U.S. National Intelligence Council released a report called  "Global Trends 2030: Alternative Worlds" that tries to anticipate the global shifts that will likely occur over the next two decades (see Black Swan Events).  Making their top 10 list (coming in at #7) was:

 

7. Solar Geomagnetic Storms

"Solar geomagnetic storms could knock out satellites, the electric grid, and many sensitive electronic devices. The recurrence intervals of crippling solar geomagnetic storms, which are less than a century, now pose a substantial threat because of the world's dependence on electricity," the report says.

 

And in 2013 Lloyds issued a risk assessment for the insurance industry called Solar storm Risk to the north American electric grid which calls another `Carrington’ class event inevitable, and the effects likely catastrophic, but the timing is unknowable.

 

Other plausible causes of a prolonged, widespread power outage include an EMP attack, a major earthquake, major hurricane, or even simply as a result of a critical failure in our aging, and over-taxed infrastructure.

 

The most recent ASCE (American Society of Civil Engineers) report card on America’s infrastructure (2013) warns that our cumulative GPA sits at only a D+, and two of our most vulnerable systems are drinking water and the electrical grid. 


And it’s not just an American concern. The most recent
UK: 2015 Civil Risks Register ranks both cyber attacks and large grid-down events as two of their biggest worries.

 

Lloyds, perhaps the most recognizable name in insurance and risk analysis around the world, last week – in collaboration with the University of Cambridge Centre for Risk Studies – published a 68 page analysis of a fictional but plausible cyber attack on the United States power grid called Business Blackout:The insurance implications of a cyber attack on the US power grid.

 

From their press release New Lloyd’s study highlights wide ranging implications of cyber attacks

 

Wed 08 Jul 2015

Lloyd’s and the University of Cambridge’s Centre for Risk Studies are today launching a new report, Business Blackout. This joint report is the first to examine the insurance implications of a major cyber attack, using the US power grid as an example.

The report depicts a scenario where hackers shut down parts of the US power grid, plunging 15 US states and Washington DC into darkness and leaves 93 million people without power. Experts predict it would result in a rise in mortality rates as health and safety systems fail; a decline in trade as ports shut down; disruption to water supplies as electric pumps fail and chaos to transport networks as infrastructure collapses.

The total impact to the US economy is estimated at $243 billion, rising to more than $1 trillion in the most extreme version of the scenario. The cyber attack scenario shows the broad range of claims that could be triggered by disruption to the US power grid, with total amount of claims paid by the insurance industry estimated at $21.4 billion, rising to $71.1 billion in the most extreme version of the scenario.

(Continue . . . )



While plausible, and chilling, a cyber attack isn’t inevitable.  Hurricanes, and earthquakes, however . . . are.


Many New York and New Jersey residents were still without power a week after Super storm Sandy hit in 2012,  Category 3 hurricane Wilma left large swaths of Miami dark for well over a week in 2005, and life in New Orleans remained a daily struggle for tens of thousands of residents months after Katrina.


While I promote general preparedness, not planning for a specific event, prolonged power outages often accompany a wide range of disasters, so being ready for one makes sense.

 

So . . . if a disaster struck your region today, and the power went out, stores closed their doors, and water stopped flowing from your kitchen tap for the next 7 days  . . .  do you have:

 

  • A battery operated NWS Emergency Radio to find out what was going on, and to get vital instructions from emergency officials?
  • A decent first-aid kit, so that you can treat injuries?
  • Enough non-perishable food and water on hand to feed and hydrate your family (including pets) for the duration?
  • A way to provide light (and in cold climates, heat) for your family without electricity?   And a way to cook?  And to do this safely?
  • An emergency plan, including meeting places, emergency out-of-state contact numbers, and in case you must evacuate, a bug-out bag?
  • Enough emergency cash to pay for essentials if ATMs and Credit Card machines are down?
  • Spare supply of essential prescription medicines that you or your family may need?

 

If your answer is `no’, you have some work to do.  A good place to get started is by visiting Ready.gov.

 

Unfortunately, a lot of people end up  making  the wrong choices when they prepare. 

 

They buy candles instead of battery operated lights, they use generators inside their house or garage, or resort to dangerous methods to cook or to heat their homes.  As a result, when the power goes out, house fires and carbon monoxide poisonings go up.


September is National Preparedness Month, and we’ll be covering how to prepare safely for these, and other scenarios.  But one should never wait for a specific date to begin getting ready for a disaster.   The time to start is today.

 

For more information on emergency preparedness. Some of my preparedness blogs include:

When 72 Hours Isn’t Enough

The Gift Of Preparedness: 2013

In An Emergency, Who Has Your Back?

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